This week, Ottawa will get its first Bitcoin ATM, shining a local spotlight on a new digital currency and placing it within reach of many of us for the first time.

However the Bitcoin, which has seen wild swings in its value over the past year, isn’t recognized by banks. Furthermore, the centre that’s responsible for monitoring investments in Canada for criminal behaviour or terrorist fundraising — the Financial Transactions and Reports Analysis Centre of Canada — doesn’t watch it. So acquiring some of the digital currency can be a gamble.

Still on Thursday, Ottawa will join Toronto, Vancouver and Montreal as municipalities that have Bitcoin dispensing machines. The machine will be run by crypto-currency firm BIT-Capital.com and will be housed in the Clocktower Brew Pub on Clarence Street in the ByWard Market.

With the currency finally hitting the streets of the nation’s capital, here is a little primer about a hot new topic for investors everywhere:

What is Bitcoin?

Bitcoin is a digital currency that exists solely online. Unlike precious metals or more traditional forms of currency, which hold value because they are backed by a country or are used to manufacture goods, Bitcoin is only buoyed by market demand. There are only 12.3 million virtual Bitcoins in circulation and those “coins” are traded through a Peer-to-Peer computer network, much as people used to share music files. A person’s Bitcoins are collected in a “digital wallet,” which also holds security codes proving the holder is the rightful owner of the currency.

What does a Bitcoin look like?

Nothing. The currency is all “bit” and no “coin” as there are no actual physical Bitcoins. Pictures of shiny coins emblazoned with a “B” are just promotional material aimed at helping to explain the Bitcoin phenomena. When buying Bitcoin, a buyer is assigned a digital wallet. The wallet holds all of that person’s Bitcoins securely on a server located somewhere on the Internet.

What can I use Bitcoin for?

Since Bitcoin is not affiliated with any banks and is sent through global communications networks, the currency is global in nature. People can sell or transfer thousands of dollars worth of Bitcoin to people in other parts of the world without having to pay hefty bank fees or, at least for the time being, having their money transfer scrutinized by government agencies such as FINTRAC. Several stores, such as online retailer Overstock.com, now accept Bitcoin as payment for goods or services. The Chicago Sun-Times plans to allow people to use Bitcoin to pay for an online subscription beginning next month. Some people, such as Vancouver’s Sarah Yu, are even selling goods online and requesting Bitcoin as payment. Yu is reportedly trying to sell her 2006 Volkswagen Jetta for 10 Bitcoins. Bitcoin charges far less in fees than credit card processors do, which is helping to bolster its popularity among retailers.

What’s the value?

That depends on the day. Bitcoin is hugely volatile, which has helped to boost its popularity as many people choose to buy and sell the currency online with the intention of turning a profit. When the currency was first released in 2009, it was valued at around $0.003. However, in January 2013 it hit $14 per Bitcoin and peaked at $1,200 in December, before falling to around $600 because the government in China took issue with the currency and banned its use by financial institutions. It’s since climbed back up to $919. The currency is divisable, meaning purchasers don’t have to buy an entire Bitcoin. They can buy half of one. Or a quarter, or an eighth.

What’s the purpose of a Bitcoin dispensing machine?

The machine will allow people to buy Bitcoin without needing any technical know how, which is required to trade in the currency online. However, according to Bit-Capital.com, the company installing the machine, the new ATM will only allow people to purchase Bitcoins, if they want to sell them afterwards they will need to do so through online Bitcoin exchanges.

Why is Bitcoin controversial?

The digital currency is virtually untraceable, which has sent governments around the world scrambling to figure out how to trace financial transactions occurring in Bitcoin. In December, the Federal Bureau of Investigation in the U.S. shut down illegal drug-smuggling website The Silk Road, seizing more than 173,000 Bitcoins in the process, valued at more than $433.6 million US. Canada Revenue Agency has warned Canadians that it will begin looking for Bitcoin transactions and profit taking as part of any audits it undertakes on Canadians. The government’s financial watchdog warned that any transactions conducted using Bitcoin as payment are still subject to all applicable taxes.

Are there risks to buying Bitcoin?

The risks are huge. In the stock market, which is heavily regulated, investors are awarded equity in a company for their investment. An investor can loose everything in the stock market, should a company go bankrupt, but companies are forced to report their financial performance regularly and there are mechanisms in place to recoup some money for investors should the worst happen. When we look at currency, such as the Canadian or U.S. dollar, they are backed by tangible assets, which is what gives them their value. Bitcoin buyers receive nothing to secure their investment. The entire system is based on good will and demand from other buyers. If the market for Bitcoin dries up, the value of those investments will disappear. In the absence of a regulatory or centralized banking environment, any discrepancies in the amount of bitcoins debited from someone’s account will be incredibly difficult, if not impossible, to correct.

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